As you create your retirement plan, you’re likely considering the advantages of each investment, asking which ones will help grow and preserve your savings for the long-run. Annuities, often overlooked as a main component of a retirement strategy, have a powerful tool to help you grow your savings – tax-deferred benefits.
Tax deferral is among the most valuable tools for accumulating assets, which means:
- You don’t pay current income tax on interest credited to your contract, unless you make a withdrawal
- Your interest compounds, meaning you earn interest on your interest as well as your premium
- You may accumulate assets faster than you would in a taxable account
Who can benefit?
Tax-deferred investments typically benefit those who have a longer-term investment frame, so they have the time to let their investment compound, and those who expect they may be in a lower tax bracket when they do withdraw their savings. Other considerations include:
- Unlike 401ks and IRAs, annuities have no contribution limit, so they may benefit individuals who have contributed the maximum to their employer plans and IRAs.
- Unlike 401ks and IRAs, annuities are not required to be withdrawn at age 70½, so they may benefit individuals who want to delay withdrawals.
Growth of hypothetical $100,000 investment in a taxable and tax-deferred investment. Chart assumes a 28% federal tax rate and 4.5% annual return.
Ask questions – lots of them
There’s no substitute for good advice. Now that you’re armed with a little knowledge, talk to a financial advisor to help you create a sound investment strategy that fits your financial goals and needs. They’ll be able to point you in the right direction.
IRAs and other qualified plans already provide tax deferral like that provided by an annuity. For a cost, annuities provide other features and benefits such as contract guarantees, death benefits or lifetime income. If other options are available, you should not purchase a qualified annuity unless you want these additional features and benefits taking into account their cost.
Annuities are issued by Voya Insurance and Annuity Company (Des Moines, IA), ReliaStar Life Insurance Company of New York (Woodbury, NY) and Voya Retirement Insurance and Annuity Company (“VRIAC”, Windsor, CT). Variable annuities are distributed by Directed Services LLC. Within the state of New York, only ReliaStar Life Insurance Company of New York and VRIAC are admitted, and their products issued. All are members of the Voya® family of companies.
All guarantees are based on the financial strength and claims paying ability of the issuing insurance company, who is solely responsible for all obligations.
Variable annuities are subject to investment risk, are not guaranteed and will fluctuate in value. In addition, there is no guarantee that any variable investment option will meet its stated objective.